Lightning and Thunder

The problem with a global economy is that something happening "over there," over which we have no control, can have a very big effect over here. It's nothing new. There was the Long Depression of 1873-96, which was called the Great Depression until a greater depression came along (sort of like the "Great War" became "World War I.") That one was felt in the United States and Europe. But our economies are much more intertwined now than they were then.

Today comes news that Italian 10-year government bonds are trading above 7 percent, which with Greece was the bail-out trigger. Things seem to be falling apart rapidly over there.

Paul Krugman:

This is the way the euro ends.

This is the way the euro ends.

Not with a bang but with bunga-bunga.

Seriously, with Italian 10-years now well above 7 percent, we’re now in territory where all the vicious circles get into gear — and European leaders seem like deer caught in the headlights. And as Martin Wolf says today, the unthinkable — a euro breakup — has become all too thinkable ....

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I still find it hard to believe that the euro will fail; but it seems equally hard to believe that Europe will do what’s needed to avoid that failure. Irresistible force, meet immovable object — and watch the explosion.

Krugman seems to be right about things economic most of the time, and he's very smug about it. I hope somebody is working out an orderly way for European countries to exit the Euro. If there even is such a thing.

But I have decided that, just to be safe, I will not buy any 10-year Italian government bonds.